Battle Lines Are Being Drawn In Europe Ahead Of Key Greek Bailout Negotiations

Antonis Samaras is having his biggest week since being elected as
prime minister of Greece on June 20.

Today, Samaras meets with the chair of eurozone finance
ministers, Jean-Claude Juncker, ahead of a meeting Friday
with German chancellor Angela Merkel and a Saturday
meeting with French president Francois
Hollande.

Juncker has been critical of relaxing requirements for the Greek
bailout package, and just this morning he said that no
decision on Greek aid will be made before October. The real
purpose for today's meeting, writes Citi economist Jürgen Michels in a note to
clients this morning, is to "to present the savings measures
identified by the finance minister as a sign of Greece’s
commitment to the Troika programme."

Voices from around Europe are coming out in support of Samaras as
he attempts to renegotiate Greece's bailouts.

Adam Posen, a monetary policymaker at the Bank of England, had strong words for
Germany today. He said in an interview that "it is in Germany's
interest, its commercial interest and economic interest, not just
its foreign policy idealistic interests, to really restructure
the debt that other countries owe them."

However, major political figures in Germany strongly disagree
with that assessment.

German MP Michael Fuchs, who is the deputy leader of chancellor
Merkel's CDU party, is one of them. In a sign of incredible
complacency toward the Greek negotiations,
Fuchs said today that "If Greece is going to leave
[the euro]...I don't believe it is going to have a great impact
anymore."

However, others in Germany, including CDU vice chairman Michael
Meister, seemed to offer a bit more hope for Greece, saying that
as long as no additional bailout funds to Greece were on the
table, repayment deadlines could be handled with the "largest
possible flexibility," although it's unclear exactly what that
means.

Citi economist Jürgen Michels points out that actually, since
Greece is still running a primary deficit, extending repayment
deadlines actually does mean that Greece will need more cash to
fund its budget.

Michels writes that this dynamic "suggests that it will be very
difficult to close the gap between Greece and the Troika," and
Citi still sees Greece leaving the eurozone in December.

The odds appear to be stacked against Samaras, which means he has
his work cut out for him this week.